NCSL releases estimate of impact of military budget on states, including NY.NYSNYS News

Text of February 21 National Conference of State Legislatures press release.

MILITARY’S IMPACT ON STATE ECONOMIES

The Department of Defense (DoD) operates more than 420 military installations in the 50 states, the District of Columbia, Guam and Puerto Rico.

These installations sustain the presence of U.S. forces at home and abroad. Installations located within the United States and its territories are used to train and deploy troops, maintain weapons systems and care for the wounded. They also support military service members and families by providing housing, health care, childcare and on-base education.

The DoD contributes billions of dollars each year to state economies through the operation of military installations.

This spending helps sustain local communities by creating employment opportunities across a wide range of sectors, both directly and indirectly. Active duty and civilian employees spend their military wages on goods and services produced locally, while pensions and other benefits provide retirees and dependents a reliable source of income. States and communities also benefit from defense contracts with private companies for equipment, supplies, construction and various services such as health care and information technology.

According to an analysis by the DoD Office of Economic Adjustment (OEA), the department spent $408 billion on payroll and contracts in Fiscal Year 2015, approximately 2.3 percent of U.S. gross domestic product (GDP). Spending was highest in Virginia, followed by California, Texas, Maryland and Florida. Virginia has the largest defense spending as a share of state GDP at 11.8 percent, followed by Hawaii at 9.9 percent.

Figure 1. Top States by Total Defense Spending (in billions)

Figure 2. Highest Defense Spending as a Percentage of State GDP

The economic benefits created by military installations are susceptible to change at both the federal and state levels. Recent events such as the drawdown of troops in Iraq and Afghanistan, federal budget cuts, and potential future rounds of Base Realignment and Closure have left government officials uncertain of the future role and sustainability of military installations.

These trends have been a driving force behind many states’ decisions to commission studies that define the military activity and infrastructure that exists in the state and measure the economic impact of military presence. Economic impact studies allow states to better advocate on behalf of their installations and plan for future growth or restructuring.

At least 24 states have commissioned their own study to quantify the direct and indirect effects of military presence on a state’s economy. Impacts generally include salaries and benefits paid to military and civilian personnel and retirees, defense contracts, local business activity supported by military operations, tax revenues and other military spending. In 2015, for example, military installations in North Carolina supported 578,000 jobs, $34 billion in personal income and $66 billion in gross state product. This amounts to roughly 10 percent of the state’s overall economy.

In 2014, Colorado lawmakers appropriated $300,000 in state funds to examine the comprehensive value of military activities across the state’s seven major installations. The state Department of Military and Veterans Affairs released its study in May 2015, reporting a total economic impact of $27 billion.

Kentucky has also taken steps to measure military activity, releasing its fifth study in June 2016. The military spent approximately $12 billion in Kentucky during 2014-15. With 38,700 active duty and civilian employees, military employment exceeds the next largest state employer by more than 21,000 jobs.

Even states with relatively small military footprints have reported significant economic gains. In Michigan, for example, defense spending in Fiscal Year 2014 supported 105,000 jobs, added more than $9 billion in gross state product and created nearly $10 billion in personal income. A 2016 study sponsored by the Michigan Defense Center presents a statewide strategy to preserve Army and Air National Guard facilities following a future Base Realignment and Closure (BRAC) round as well as to attract new missions.